Manchester United and Rangers were today drawn in the same group for the Champions League in what will become an unofficial contest to be named the best club in Britain.

The domestic champions north and south of the border were drawn in Group E along with Panathinaikos and Stuttgart, while Arsenal were handed the toughest task of the five British clubs by being drawn in Group B alongside Inter Milan, Dynamo Kiev and Locomotiv Moscow.

Chelsea will face Lazio - former club of Hernan Crespo and Juan Sebastian Veron - Sparta Prague and Besiktas in Group G, while Celtic are in Group A with Bayern Munich, Lyon and Anderlecht.

The Manchester United v Rangers duels will command the most attention, and what will inevitably be dubbed Othe Battle of Britain' has added interest in that United boss Sir Alex Ferguson once played for the Glasgow club.

Ferguson is also old friends with Alex McLeish, the man who now manages Rangers, from the days when they were manager and captain of Aberdeen.

United's first match is at home against Panathinaikos on September 16, with the first Rangers game at Ibrox on October 22.

Ferguson said: "It's a great draw. I was half expecting to get a Scottish team, and it has happened. Alex McLeish is an old player of mine and has done a great job at Rangers."

Rangers chairman John McClelland said: "You could say it's going to be a play-off for the unofficial title of undisputed champions of Britain.

"We wanted a big team in our group, either Real Madrid or Manchester United and we got one - perhaps the biggest."

Arsenal face two daunting trips to eastern Europe, and in the recent past have lost to both Spartak Moscow and Shakhtar Donetsk, as well as a first game at Highbury against Serie A runners-up Inter on September 17.

The Gunners vice-chairman David Dein insisted he was not worried, saying: "It's great for the air miles! But we are playing some very attractive football, we have won three games, we have got a strong squad but it's very early.

"We have improved and the fact we were seeded fifth shows we have progressed. It's a hard draw but it's there to be won.

"We have never passed the quarter-final stage so we hope we can do better than that."

Chelsea's chairman Ken Bates had hoped to be paired with the Moscow club as a reward for the club's Russian owner Roman Abramovich but had to be content with Lazio, Besiktas and a first match away at Sparta Prague.

Bates said: "I was hoping we were going to get Locomotiv Moscow and Dynamo Kiev, it would have been rather ironic with our new ownership, but Arsenal got those instead.

"Crespo and Veron might have a point to prove against Lazio, but I think Claudio Ranieri and the players did a great job getting us there and with the strengthening we've done I think we've got a good chance of getting into the knock-out stages.

"The spending of the money and all the new players we have now makes it a whole new ball game."

Celtic chairman Brian Quinn believes the club have a good chance of progressing to the knock-out stage, even with their first match away at Bayern Munich.

He said: "Bayern are obviously favourites but the rest of us are pretty evenly matched. The one thing we must do, and Newcastle's experience in the Champions League last season showed this, is that whatever happens not lose heart at any stage of the competition."